The New York Times and Techflash are leading news this morning about Amazon and how it looks like it will become the Wal-Mart of the internet. The question is, is anyone ready to follow or take on Amazon on its own turf.
All ecommerce companies should be looking at what Amazon is doing right now because in the longer run, Amazon is going to continue to own significant portions of ecommerce. Regardless of what Ebay, Bonanzle and other online retailers hope to make of the internet, Amazon, the company that has to date survived two bust cycles in the economy is getting ready to send out its own private label merchandise. That alone will make things interesting for many of the online retailers; Amazon is always going to be able to offer the lowest price on just about anything. If you watch the price wars amongst 3rd party sellers on Amazon you will see this in action. While shoppers win on this one, we are becoming a discount warehouse pricing country. Retail is simply not going to be able to charge list price anymore, not with online sales offering steep discounts on the same merchandise that you will find on the internet.
So far, AmazonBasics’ selection is fairly modest, consisting of a small number of cables and blank DVDs and CDs. But presumably Amazon will continue adding items to the mix. Amazon, in embracing private labels, is following the path of such brick-and-mortar chains as Wal-Mart and Costco, which offer their own discount house brands. Private labels have the potential for higher margins, since they eliminate the middleman in the supply chain. They also appeal to bargain-hunting shoppers in the recession. House brands also create competition with third-party retailers who sell products on Amazon, which could become an issue for Amazon. Source: Techflash
Private Label Amazon is going to influence people who sell those same items on Amazon, but are unable to garner deep discounts from wholesale companies. Smaller sellers will never get the same discounts as someone who can purchase thousands of copies of an item; rather they will be stuck with the general trade discounts of 25 to 50%. While many ecommerce sites will debate the odds of taking on eBay and Amazon directly, plucky sites like Bonanzle have been able to erode eBay, but few have taken on Amazon. What keeps this interesting is that there is no way for a small company to compete in the market right now unless they hitch up to Amazon as a third party seller.
This is where the future of ecommerce is going to be interesting and where there is a distinct series of niches that can be capitalized on. While Amazon is focused on becoming a mega supplier for everything, and Ebay still fumbles through the way that they do business, smaller fleeter Amazon style stores that are aligned around vertical items could make a dent in the market. While many have tried this, few have been as successful as Amazon or Ebay in garnering traffic or generating sales for third party sellers. While the pressure is on for third party sellers at Amazon, sellers who are forced out of market are going to have to make their own coop sales sites, and work on building a vertical series of stores around specific types of items.
It is going to be an interesting year to see how the competition decides it wants to take on Amazon, or if it is just going to sidestep the Amazon model completely and work out a new way of doing ecommerce on the internet.
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(Cross-posted @ TechWag)